18. Settlement

Question 1

What is the process of negotiation? When is a negotiation binding?

Answer 1

An offer which has been accepted, with terms sufficiently clear to be enforceable.
So long as these are in place, the agreement is binding except where agreed the terms will only become binding in certain circumstances, even if the precise wording of a consent order has yet to be agreed.
Some terms might be agreed before an overall agreement is finalized, but care must be taken to ensure that these are not seen as binding representations
There will need to be consideration, which could be given through concessions.
A binding agreement can only be reached by the parties or with individuals with authority to settle. A lawyer can act as such as an agent. Therefore, even if not within the instructions, it will bind the client except where agreed in advance that any terms agreed will be subject to client approval.
Equally, they may agree at the start it will only be enforceable where it has been reduced to a final form in writing and signed.
If agreed terms have not been included in an order, they will still be binding unless agreed otherwise.

Question 2

What duty has a lawyer got in relation to terms agreed at negotiation?

Answer 2

That they are sufficiently clear.

Question 3

What are joint settlement meetings?

Answer 3

A particular format that mixes aspects of negotiation and mediation.
The parties may agree to a meeting or a court may order one.
Protected by the without prejudice principle.
Meeting normally attended by the parties, their legal reps, and a representative of the insurer. Each party is in a separate room with their lawyers, and the barristers from each side meet in a third room to hold a without prejudice discussion and to exchange and discuss potential offers.
The barristers can get additional instructions and discuss options by visiting the parties and other lawyers in separate rooms.
It may be cost effective and can be successful as all relevant people are together in one room.

Question 4

What is part 36?

Answer 4

A procedural code about offers made pursuant to that section.

Question 5

What happens if an offer is not made in accordance with rule 36.5?

Answer 5

It will not have the consequences specified in part 36.

Question 6

To what can a part 36 offer be made in respect of?

Answer 6

The whole or party of any issue in:
- A claim
- A counterclaim
- Other additional claim or
- An appeal or cross-appeal

Question 7

What is a Calderbank offer?

Answer 7

A letter written “without prejudice save as to costs” or “without prejudice” but subject to an express reservation of the right to refer to the letter on the issue of costs should the claim proceed to judgment.

Question 8

Is a Calderbank offer the same as a part 36 offer?

Answer 8

No

Question 9

Will a Calderbank offer attract the part 36 provisions?

Answer 9

If written in a compliant way, otherwise no.
It is an important consideration in the exercise of the court’s discretion.

Question 10

Where there is a purported part 36 offer but there is an issue as to its construction, how should the court interpret it?

Answer 10

It should prefer, if possible, the interpretation that gives effect to the state intention.
“validate if possible”
However, there are limits to the approach and the courts readily understand that there are more ways of settling than just part 36.
Equally, if there is a failure to complete one of the mandatory requirements in part 36(5) the offer will not be validated.

Question 11

Where there are multiple defects in a part 36 offer, should the courts still interpret that as a valid part 36 offer?

Answer 11

No, they should not be wholly discounted. There can be de minimis errors but the general rule is that it should be strictly compliant.
Equally, if there is a failure to complete one of the mandatory requirements in part 36(5) the offer will not be validated.

Question 12

If there is a failure to complete one of the mandatory requirements in part 36(5), will the courts interpret this offers still as a valid one?

Answer 12

No.

Question 13

Is a non-compliant but purportedly part 36 offer still taken into account for costs purposes?

Answer 13

Not with the effects of a part 36 offer, but under the general discretion of part 44.

Question 14

Are parties bound to make offers compliant with part 36?

Answer 14

No, not unless they want the part 36 benefits

Question 15

Who is the offeror for part 36?

Answer 15

The party who makes the offer

Question 16

Who is the offeree for part 36?

Answer 16

The party receiving the offer

Question 17

What is a trial for part 36 offers?

Answer 17

Any trial in a case whether it is a trial of all issues or of liability, quantum or some other issue

Question 18

When is a trial “in progress” for part 36?

Answer 18

From the time when it starts until the time when judgment is given or handed down

Question 19

When is a case “decided” for part 36?

Answer 19

When all issues in the case have been determined, whether at one or more trials

Question 20

What is a “trial judge” for part 36?

Answer 20

It includes the judge allocated in advance to conduct a trial

Question 21

What is “the relevant period” for part 36?

Answer 21

In the case of an offer made not less than 21 days before a trial, the period specified under rule 36.5(1)(c) (a period of not less than 21 days in which the offeror/offeree would be liable for costs) or such longer period as the parties agree

Otherwise, the period up to the end of such trial

Question 22

Does a part 36 offer also have cost implications for appeal proceedings?

Answer 22

No, unless it was also made in those appeal proceedings.

Question 23

How should a part 36 offer be made?

Answer 23

In writing
Made clear it is pursuant to part 36
Specify a period of not less than 21 days in which the defendant will be liable for the claimant’s costs (except where a trial is less than 21 days away)
State whether it relates to the whole of the claim or to part of it or to an issue and if so which issue
State whether it takes into account any counterclaim.

Question 24

Is a part 36 offer inclusive of interest?

Answer 24

Yes, until the relevant period expires or, if we are less than 21 days away from trial, 21 days have passed

Question 25

May a part 36 offer make provision for interest?

Answer 25

Only on a date after the relevant period expires or, if we are less than 21 days from trial, 21 days have passed.

Question 26

What happens if a part 36 offer does not make any provision for interest?

Answer 26

It shall be treated as inclusive of interest up to date of acceptance if it is later accepted.

Question 27

What must a part 36 offer also contain if it is a personal injury/provisional damages/deduction of benefits claim?

Answer 27

Such further information as required by those rules.

Question 28

How may the rule that a part 36 offer state it is intended to be taken as such be abided by?

Answer 28

Any way, but one may be “PART 36 OFFER” at the head of the document

Question 29

Can a claimant be responsible for the costs of a counterclaim?

Answer 29

Yes, as the relevant period provision implies that.

Question 30

Can a valid part 36 offer be given pre-issue?

Answer 30

Yes

Question 31

Can a valid part 36 offer be given for a counterclaim where we are pre-issue for a counterclaim but post issue in the claim?

Answer 31

Yes.

Question 32

Can a valid part 36 offer be made post-issue where the part 36 offer relates to unpleaded issues?

Answer 32

No, as the offer needs to refer to the pleaded issues.

Question 33

Does the requirement that the offer “relate” to a claim require exact correlation to the pleading?

Answer 33

No.

Question 34

Is an offer in respect of a solicitor’s hourly rates a valid part 36 offer?

Answer 34

Yes, though this is deprecated.

Question 35

Where an offer is not construed as a part 36 offer, will the consequences in part 36 be applicable?

Answer 35

No

Question 36

Are terms as to costs consistent with part 36?

Answer 36

No

Question 37

Are offers to pay a global sum inclusive of costs part 36 compliant?

Answer 37

No.

Question 38

Can a claimant make a valid part 36 offer in which they do not ask for the defendant to pay costs?

Answer 38

There is conflicting authority on this.

Question 39

Is an offer which excludes interest a part 36 offer?

Answer 39

No
It must include all interest for the relevant period.

Question 40

Does an additional term as to interest after the end of a relevant period comply with part 36?

Answer 40

Yes.

Question 41

What are the consequences of making a late part 36 offer?

Answer 41

1. The obligation to specify a period of at least 21 days is removed
2. The relevant period is up until the end of the trial, although permission will be needed to accept the offer after the start of the trial
3. There is no automatic costs order upon acceptance of a later offer and the court must instead decide if not agreed
4. Late offers do not attract the usual consequences unless the court abridges time

Question 42

Does a part 36 offer made less than 21 days before trial change its status if the trial is postponed?

Answer 42

No, it remains as if the trial was to have gone ahead and so will not have the usual consequences unless the court abridges time.

Question 43

Are joint offers part 36 compliant?

Answer 43

Yes, especially where they are from persons holding a united front and the subsequent correspondence is such to estop them from deviating.
However, it is possible that on other occasions it may not attract any part 36 consequences, such as where one party rejects the offer and the other cannot accept it without the other.

Question 44

Where a defendant makes a part 36 offer to pay a sum of money in settlement, how should that be structured?

Answer 44

As a single sum of money

Question 45

Where a defendant offers to pay all or party of the sum at a date later than 14 days after acceptance, is this a part 36 offer?

Answer 45

No, unless accepted.

Question 46

When may a part 36 offer be made?

Answer 46

At any time, including before commencement of proceedings

Question 47

When is a part 36 offer “made”?

Answer 47

When it is served on the offeree.

Question 48

Would a part 36 offer alone constitute a reasonable attempt to use adr?

Answer 48

More than likely not.

Question 49

Will a part 36 offer made before issue attract part 36 consequences?

Answer 49

Yes, in the same way.

Question 50

May parties request clarification of a part 36 offer?

Answer 50

Yes, within 7 days of it being made

Question 51

What happens if the offeror does not give the requested clarification?

Answer 51

If they do not reply within 7 days of receiving it, the offeree may, unless the trial has started, make an application for an order that the offeror do so.

Question 52

If the court orders clarification to be made, what must it also do?

Answer 52

Specify the date on which the part 36 offer is treated as having been made.

Question 53

Can a part 36 offer be withdrawn?

Answer 53

Yes, but only if the offeree has not previously served notice of acceptance.

Question 54

How does the offeror withdraw/change a part 36 offer?

Answer 54

By serving written notice of the withdrawal or change of terms on the offeree.
If after a relevant period, this can be done without the permission of the court or it can be automatically withdrawn in accordance with its terms.
If before a relevant period, the change/withdrawal has effect upon expiry of the relevant period of the original offer.
If the offeree serves notice of acceptance before expiry of the relevant period, it has effect unless the offeror applies to the court for permission to withdraw or change:
1. Within 7 days of the notice of acceptance; or
2. If earlier, before the first day of trial

Question 55

When does notice of withdrawal take effect?

Answer 55

If it is after the relevant period has expired, then when the notice of change/withdrawal is served.

Question 56

Where the changing of the terms results in a more advantageous part 36 offer, how is that treated?

Answer 56

As a new part 36 offer on improved terms. The period specified shall be 21 days or any longer identified in the written notice of change.

Question 57

When may the court allow for an accepted offer to be withdrawn/changed?

Answer 57

If satisfied that there has been a change of circumstances since making the offer and that it is in the interests of justice to give permission.

Question 58

How is a part 36 offer accepted?

Answer 58

By serving written notice of acceptance on the offeror.
Has to be done with the court’s permission where:
1. it has been accepted by one or more but not all defendants and they do not have several liability/the other claims have not been discontinued if sued jointly.
2. The relevant period has expired but further deductible amounts have been paid to the claimant since offer
3. An appropriation is required; or
4. A trial is in progress.

Question 59

When may an offer be accepted for part 36?

Answer 59

At any time, whether or not a different offer has been made, unless already withdrawn.

Question 60

What must happen where the court gives permission for a party to accept a part 36 offer?

Answer 60

Unless agreed, the court must make an order dealing with costs, potentially those being the standard part 36 consequences.

Question 61

What costs will the claimant be entitled to if a part 36 offer is accepted?

Answer 61

The costs of the proceedings up until the notice of acceptance was served, except where:
1. Scenario 1
a. Acceptance relates to only party of the claim; and
b. At the time of serving acceptance, the claimant abandons the balance of the claim
At which point it will be only the costs of that part of the claim unless ordered otherwise

The two above scenarios (discounting the one below) must be assessed in the standard way, except where the costs are fixed by the rules

2. Scenario 2:
   a. A part 36 offer was made less than 21 days before trial and is accepted; or
   b. A part 36 offer which relates to the whole of the claim is accepted after expiry of a relevant period; or
   c. a part 36 offer which does not relate the whole of the claim is accepted at any time
   at which point costs must be determined by the court (for a and c in the usual way of determining costs) unless agreed.

Question 62

How are costs determined where a party accepts a part 36 offer outside of the relevant period?

Answer 62

Except where it is agreed and unless the court considers it unjust to do so, it must order:
1. the claimant be awarded costs up to the date on which the relevant period expired; and
2. the offeree pay the offerors’ costs from the date of expiry of the relevant period until the date of acceptance.
Whether it is unjust must be looked at in all the circumstances of the case.
There is no presumption that a late-accepting party would be ordered to pay on an indemnity basis. The usual basis would be the standard basis unless conduct is in issue.
Where the reason for not accepting is that it is not possible to see what prognosis would be like is a reasonable reason for not accepting and is not a reason to depart from the standard basis.
Where a claimant has repeatedly failed to engage and consistently turned down better offers only to accept an earlier one on the eve of the trial, indemnity is the preferred case.
Dishonesty about the full extent of an injury, where not a gross exaggeration, is not a reason to order indemnity costs.
There is a different between where the facts of the case do not change and where they do/the implications of them do.

Question 63

Does a part 36 costs order include costs for the counterclaim?

Answer 63

Yes, if it is stated that it has been taken into account.

Question 64

Are the consequences of accepting a part 36 offer after the relevant period and within the period the same?

Answer 64

No, there is a distinction.
The general rule for within is all costs of proceedings up to the date on which notice of acceptance was served.

Question 65

Can the court order any interim payments after part 36 acceptance?

Answer 65

Yes

Question 66

What preaction costs can be recovered from a part 36 offer?

Answer 66

Only those which would have been recoverable in any event.

Question 67

What are the other effects of acceptance of a part 36 offer?

Answer 67

1. The claim will be stayed
2. If the offer relates to the whole claim, the stay will be on the basis of the terms of the offer
3. If the offer relates to part of the claim, the stay will be as to that part upon the terms of the offer

Question 68

If approval of the court is required for acceptance of a part 36 offer, when would a stay occur?

Answer 68

Only after approval of that offer.

Question 69

What is the extent of a stay after acceptance of a part 36 offer?

Answer 69

Will not effect the power to enforce the terms of the offer or to deal with any question as to costs

Question 70

By when should the money in a part 36 offer be paid?

Answer 70

Unless agreed otherwise in writing, within 14 days of acceptance or when the court makes an order for provisional damages/periodical payments, unless the court orders otherwise.

Question 71

What happens if the money in a part 36 offer is not paid within time?

Answer 71

If not paid within 14 days, the claimant may enter judgment for the unpaid sum.

Question 72

Where the part 36 offer is not for a single sum of money, can the claimant still enforce the offer?

Answer 72

Yes, where it is accepted and a party alleges the other has not honoured the terms of the offer, that party may apply to enforce those terms without the need for a new claim

Question 73

If defendants are jointly sued/in the alternative, where may a claimant accept a part 36 offer from a defendant?

Answer 73

If the claimant:
1. Discontinues the claim against the defendants who have not made the offer; and
2. Those defendants give written consent to the acceptance of the offer

Question 74

If defendants are alleged by the claimant to have several liability, where may a claimant accept a part 36 offer from a defendant?

Answer 74

The claimant may:
1. Accept the offer; and
2. Continue with the claims against the other defendants if entitled to do so.

Question 75

Where there are multiple defendants who are not jointly sued/in the alternative NOR are they claimed to have several liability, how can a claimant accept a part 36 offer from one of them?

Answer 75

With permission from the court.

Question 76

Can a part 36 offer be disclosed?

Answer 76

Only for costs as it is treated as without prejudice save as to costs.
The fact of a making of an offer and the terms of it may not be communicated to the trial judge until the case has been decided except where:
a. The defence of tender before claim has been raised
b. Where the proceedings have been stayed following acceptance of a part 36 offers
c. Where the offeror and offeree agree in writing to refer to it
d. Where, although the case has not been decided:
a. Any part of, or issue in, the case has been decided (he can also be told whether there are part 36 offers other than those below but cannot be told the terms of those unless any other part above applies); and
b. The part 36 offer only relates to those parts that have been decided

Question 77

Where do the cost consequences in part 36 apply?

Answer 77

Where:
a. A claimant fails to obtain judgment more advantageous than a defendant’s part 36 offer; or
b. Judgment against the defendant is at least as advantageous to the claimant as those in the claimant’s part 36 offer.

Question 78

What does “more advantageous” in respect of costs mean?

Answer 78

Where it is better, in money terms, by any amount, however small

Question 79

What does “at least as advantageous mean”?

Answer 79

As it says – at least as good in money terms

Question 80

Where the claimant has rejected a part 36 offer but fails to obtain judgment more advantageous, what would the defendant be entitled to?

Answer 80

The court must order (except where the offer is withdrawn or changed to be less advantageous and the judgment is more advantageous, or it is less than 21 days before trial and the court has not abridged the period, or it is a soft tissue injury claim) unless it considers it unjust to do so
(a) Costs (including any recoverable pre-action costs) from the date of expiry of the relevant period (normally on the standard basis unless claimant’s actions were totally unreasonable - court has a discretion here); and interest on those costs (not in excess of a normal commercial rate)

Question 81

Where the defendant has rejected a part 36 offer but the judgment is at least as advantageous to the claimant as in the offer, what would the claimant be entitled to?

Answer 81

It must (except where the offer is withdrawn or changed to be less advantageous and the judgment is more advantageous, or it is less than 21 days before trial and the court has not abridged the period) order unless it considers it unjust to do so:
a. Interest on the whole or party of any sum of money at a rate not exceeding 10% above base rate or some or all of the period starting with expiry of the relevant period;
b. Costs on indemnity basis from the date on which the relevant period expired
c. Interest on those costs at a rate not exceeding 10% above base rate; and
d. Provided the case is decided and there has not been a previous order of this, an additional amount not exceeding £75,000 calculated by applying the prescribed percentage to an amount which is:
a. The sum awarded to the claimant by the court or
b. The sum awarded to the claimant by the court in respect of costs
A judge can conclude it would be unjust to order some of the orders above.
Failing to beat a part 36 offer as a trustee is not serious misconduct so as to deprive them of their trustee entitlement to indemnity cost.

Question 82

What are the prescribed percentages for part 36 offers?

Answer 82

Up to £500k: 10% of the amount awarded
Above 500k: 10% of the first £500,000 and, subject to the limit of £75k, 5% of any amount above that figure.

Question 83

How should the court consider whether it would be unjust to make the usual part 36 offers?

Answer 83

It should take into account all the circumstances of the case, including:
1. The terms of any part 36 offer
2. The stage at which any part 36 offer was made, including how long before the trial started the offer was made
3. Information available to the parties at the time when the offer was made
4. The conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or elevated
5. Whether the offer was a genuine attempt to settle the proceedings

Question 84

Where the court awards interest under part 36 in conjunction with awarding interest using other rule’s powers, what must the court make sure?

Answer 84

That the amount is not 10% above the base rate.

Question 85

For part 36 cost consequences, how should the phrase “upon judgment being entered” be interpreted?

Answer 85

Not narrowly. It may not be possible, based on the terms, to see whether the offer is effective directly upon judgment. May adjourn for consideration of this.

Question 86

What does the phrase “more or at least advantageous” mean for part 36?

Answer 86

Any foreign currency offer should be converted to sterling at the current exchange rate to make it comparable. No conversion is needed if the judgment and offer are in the same foreign currency.

Interest after the part 36 offer should be ignored in the calculation as a part 36 offer only includes interest up to the relevant period.

Where there is a combined offer of a lump sum and periodic payments, the judgment is only more advantageous if both aspects are separately beaten. Therefore, if there is a combined payment parties are advised to give two separate part 36 offers

A part 36 offer does NOT become more advantageous where a defendant makes some payment to the claimant to reduce the amount they owe as it is taken as a payment in pursuant of the offer, except where the party expressly states at the time that it is not intended to reduce the part 36 offer.

Making a joint offer and only winning against one may not be as advantageous.

Question 87

How should the court assess the advantageousness of non-money part 36 offers?

Answer 87

Through an open-textured approach that permits a more wide-ranging review of all the facts and circumstances of the case.

Question 88

What part 36 costs are there where the offeror is limited to a budget comprising only of applicable court fees?

Answer 88

50% of the limited costs and any other recoverable costs

Question 89

How does the court consider whether it is unjust to order part 36 costs?

Answer 89

First thing to consider is that “unless it considers it is unjust to do” so means “unless and to the extent of”
Looking at all the circumstances in the case including in particular the matters listed within the rule itself:

1. The terms of any part 36 offer
2. The stage at which any part 36 offer was made, including how long before the trial started the offer was made
3. Information available to the parties at the time when the offer was made
4. The conduct of the parties with regard to the giving of or refusal to give information for the purposes of enabling the offer to be made or elevated
5. Whether the offer was a genuine attempt to settle the proceedings

The party at risk is the party required to show these grounds.
Must be something which takes the case outside of the norm.

(1) The court should consider full encforcement would be unjust

(2) That while the circumstances of the offer being made are quite relevant

(3) The court should also adopt a broader view

It is a formidable hurdle to get over.

The admissions involved may be relevant. Equally too the public finding in relation to this may also be relevant (i.e. in a defamation case where no retraction is made).

The court should also consider what other terms had been included, i.e. a public apology too.

Conduct at trial might be relevant
In a foreign currency part 36, dramatic changes in exchange rate may make it unjust.

There is no jurisdiction to reduce the amount awarded of the additional amount the court can order. It is all or nothing.

The level of a part 36 offer, where it is a genuine attempt at settling, should not impact on the proportionality of ordering enhanced interest. The level of an offer may, however, impact whether or not it is a genuine offer.

The covid pandemic meant it was unjust to order all part 36 consequences for rent arrears.

Question 90

When is a part 36 offer a genuine attempt to settle?

Answer 90

Courts should be wary of very high settlement offers (95%, 100% of the claim) as a way to make the defendant liable for indemnity costs.
Courts have recognised settlements involve some give and take – not a demand for capitulation.

Judges likely to take a broad-brush view informed by their own assessment of the strength of the case and therefore to the extent of which the offer appears to be a genuine attempt.

Shouldn’t really be taken through without prejudice comms.
Any discount in a really high offer should be explained.

95% can be good in an open and shut case, so too can 90% in a very expensive case.

In certain circumstances, an offer to settle merely for an admission of liability and no damages may be a genuine offer.

Where success is a near certainty with no defence applicable, 99.7% has been held to be good. Only in these circumstances would that be good.

Individual decisions on cases should not inform on the offer made.
An offer of 90% was not given effect to where there was no possibility of finding contributory negligence.